The use of managed futures as an alternative asset investment should be approached with caution due to their recent volatility and the likelihood they may be exposed to price movements in the bond market.
According to Morningstar Research senior analyst Julian Robertson the expectations around the performance of managed futures may have been set by experiences during the post-global financial crisis period but this was unlikely to be repeated.
He stated that since managed futures position take long positions in equities and bonds future performance had to be based on possible market outcomes and not past successes.
"Contrary to the 2008 experience, which likely set most expectations about the performance profile of managed futures through the post-GFC period, these strategies didn't always protect portfolios in times of market stress," Robertson said.
"These outcomes highlight a few important points about managed futures that investors would do well to remember. The first is in the standard performance disclaimer – past returns are no guide to future returns and they shouldn't be looked at as absolute return vehicles."
He also warned that correlation between managed futures and equities was not causation and correlations varied over time which may expose managed futures to poor performance.
"There is no guarantee of how they will perform in up or down markets at any given point as trend-following performs better in some environments than others. It all depends on the prevailing medium-term trends and how they are positioned during times of stress," Robertson said.
"All this considered, it doesn't make sense to make up any allocation to alternatives entirely with managed futures."
